Why Liquidity is key in property investment

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By, David Green-Morgan, Global Capital Markets Research Director at JLL.

Global investment markets continue on their inexorable growth path, with accommodative monetary policy globally combining with fresh injections of QE from the Eurozone to ensure the flow of capital into direct commercial property is sustained. Transactional volumes in the first quarter of 2015 are US$148 billion, 4% higher than the same period of 2014 with all three regions seeing increases in transactional activity in local currency terms.

As it has been for the last couple of years the US continues to provide the impetus behind the growth in global transactional volumes. As the world’s biggest transactional market it is in many ways the bell weather for confidence in the commercial real estate sector and in the first quarter volumes exceeded US$70 billion, 26% higher than the same period last year and more than three times greater than the next closest market of the UK. The key to this growth in the US and globally is liquidity, debt and equity working together to drive real estate performance for investors desperate for meaningful returns in a low yield environment.

It used to be about location, location, location, and in the immediate aftermath of the financial crisis investor appetite was concentrated on core markets in the biggest cities of the world. But such is the abundance of liquidity in investment markets at present that all locations and quality of assets are being looked at in order to deploy the capital and acquire properties. Previously overlooked opportunities in suburban locations in North America, business parks in Europe and even high street retail are all finally seeing investor capital.

Alongside these more opportunistic trades the number of large single asset deals and large portfolios coming to the market is increasing globally. Many are being pursued by the largest real estate investors keen to deploy large chunks of capital in a single trade. Based on these capital market dynamics we see transactional volumes continuing to grow in 2015 to between US$740-760 billion, a 5% rise on 2014